McInnes: Fiddling with rates raises political risks for ICBC

Craig McInnes, Vancouver Sun05.17.2012

Would you like to pay more to insure your car? How about less? After a disastrous attempt last year to link premiums to traffic tickets, the Insurance Corp. of B.C. is back with a public consultation that all but ignores that issue while continuing to promote the underlying premise that good drivers should pay less and bad drivers more.Ward Perrin
/ Vancouver Sun Files

After a disastrous attempt last year to link premiums to traffic tickets, the Insurance Corp. of B.C. is back with a public consultation that all but ignores that issue while continuing to promote the underlying premise that good drivers should pay less and bad drivers more.

Once again, however, the politically sticky part of the provincewide consultation, launched this week, is the question of what it takes to be considered a good driver, and how easy it should be to lose that status and the discounts that go along with it.

ICBC doesn’t like to use the terms good and bad drivers. It prefers lower risk and higher risk.

I suspect most people consider themselves to be good drivers, or at the very least, not a hazard to themselves or others when they slide behind the wheel of a car.

From the consumer’s perspective, that makes the question of setting premiums pretty simple. We want to pay less. Period.

With a multitude of insurance companies to choose from, we would look around and pick the one offering the lowest rates for the coverage we think we need. Private insurance companies set those rates based on how great a risk we pose to them by using a wide range of risk factors.

But the government-mandated ICBC monopoly is limited in what factors it can use for basic liability insurance. It’s not allowed to consider age or gender and it is required to offer coverage to some drivers that some private insurers wouldn’t touch because the perceived risk is so high.

It also offers a provincially mandated discount for seniors and disabled persons.

All of this means that good drivers pay a premium under ICBC and higher-risk drivers get a discount, relatively speaking.

Within the factors ICBC is able to address, it wants to make its rate schedule more accurately reflect real risks. But after last year’s debacle, in which the government slapped down its attempt to link higher rates to the increased risk demonstrated by a single traffic ticket, ICBC is starting by offering a number of options without declaring a preference.

The one that seems the least controversial based on what is fair is a proposal to move to a system that assigns the blame for an at-fault accident primarily to the driver, rather than, as is now the case, to the owner of the vehicle.

Under such a system, ICBC estimates two thirds of drivers will pay less and one third will pay more.

As for the other changes ICBC is looking at, it’s less clear what problem they are intended to solve.

ICBC says it’s heard from its customers that people who are more likely to cause accidents should pay more. That’s the same language they used last year to explain why they wanted to move to a system that would penalize motorists who had received as little as one traffic ticket in the previous three years.

They argued that statistically, those motorists were more likely to have an accident than drivers who had no tickets. Now they argue that the policy of forgiving a single accident is not justified by the statistics.

They say that even after five years, a motorist who has had an accident is more likely to have another than a motorist with the same driving experience who has never had an accident. When they look back 15 years, 38 per cent of ICBC customers have had an at-fault crash that the insurance agency argues increases their risk of having another.

I have no reason to doubt that claim, or any of the others in their discussion document.

What I doubt is that there is really enough of a demand for the kind of fiddling around the edges that these changes represent to make them worth the unhappiness they will inspire among customers who suddenly find themselves deemed to be higher risk. Customers who are also voters, that is.

ICBC’s rate structure already incorporates so many exceptions to what a rate structure based only on actuarially defensible rates would look like, tackling just the few that would be politically palatable only highlights the fundamental fairness problem of a monopoly insurer — unhappy customers have no where else to go.

To see ICBC’s consultation document, follow the links under news at icbc.com.

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